John Paulson Upbeat on the U.S. Economy (SPY, XHB)

In a speech at the London School of Economics, hedge fund manager and president of Paulson & Co, John Paulson, said that the possibility of adouble-dip recession in the United States is “less than 10 percent.”He was also quick to point out that, he believed, their company had “zero impact” on the mortgage and credit crisis,” adding that, “Instead, that guilt lies with the mortgage brokers themselves. They only cared about generating fees, they falsified appraisals… this was the sad underbelly of mortgage finance in the US.”Paulson said he is optimistic on the American economy. “I think we’re at the tail end of the credit crisis,” he added, “We’re in the middle of a sustained recovery in the US.” Europe, however, “is the one soft spot in the world,” he said.Mr. Paulson also said, “It’s the best time to buy a house in America. California has been a leading indicator for the housing market, and it turned positive seven months ago. I think we’re about to turn a corner.”While he may believe the U.S. economy in on the uptrend, he is not a Pollyannaabout how we are getting there, saying he fears and expects, “currency instability and inflation due to the large amount of quantitative easing.” One could assume this by looking at his holdings, which heavily include long gold positions and short dollar positions.He noted, “Within three-to-five years, we could see high single, if not double-digit rates of inflation.”The S&P 500 (NYSE: SPY) was higher in the pre-market, trading higher by 0.28%, at $107.72.The SPDR S&P Homebuilder ETF (NYSE: XHB) was higher in the pre-market as well, by 1.39%, at $15.32.